2012 November: Beer and Pizza

There’s been so much buzz about craft beer that it’s time to ask the question: What is craft beer? By the definition of the Brewers Association a craft brewer is small, independent and traditional. Specifically,

Small: Annual production of 6 million barrels of beer or less. Beer production is attributed to a brewer according to the rules of alternating proprietorships. Flavored malt beverages are not considered beer for purposes of this definition.

Independent: Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member that is not itself a craft brewer.

Traditional: A brewer who has either an all-malt flagship (the beer which represents the greatest volume among that brewer’s brands) or has at least 50 percent of its volume in either all-malt beers or in beers that use adjuncts to enhance rather than lighten flavor.

Well, you might ask, do pizzerias and their customers pay attention to these strict definitions? Some do. But pizzerias want beers that increase traffic, drive revenues and offer good profitability. Consumers want beers that they like. They like the taste and they like the brand. Let someone else argue about whether what they’re selling or drinking is a true craft beer, some might say.

Beers Sold and Consumed as “Craft”

An easy way for retailers and consumers to separate craft beers from others is to identify the crafts as beers that are not “heritage” American light-colored lagers (such as Budweiser and Miller Lite) and not imports. The debate will go on, but from a brewing-industry perspective what will define the future will be the ability of American independent brewers to compete with the multinational brewing groups, notably ABInbev, SABMiller, MolsonCoors, Heineken and Carlsberg.

Even today, many industry-watchers say that the largest craft beer brewers are the multinationals. ABInbev has Shock Top, Wild Blue and Goose Island and controls the distribution of Kona, Widmer, Red Hook and Starr Hill. SABMiller, combined in the U.S. with MolsonCoors, has Blue Moon, Leinenkugel, Henry Weinhard and has an investment in Terrepin. It is likely that the multinationals will continue to bring new beers to the market and blur the lines between their ownership of these brands and the brands of independent brewers.

They want to take advantage of the profit margins that come from higher pricing combined with their lower cost of production, their purchasing power and their access to raw materials. They want to focus attention on their brands and away from those of independent brewers in the minds of both wholesalers and retailers.

Making beers like Blue Moon and Goose Island in very large, automated breweries that produce 10-plus million barrels of beer annually allows the multinationals to spend aggressively on sales and marketing and pocket huge profits on these brands. But independent brewers can compete. Most are not publicly traded companies and therefore do not have to report ever-increasing profits.

Key Strengths of Independent Brewers
Pizza operators would do well to understand the other side of the coin—what smaller independent breweries bring to the table. Two of the most important advantages of independent brewers are:

• Innovation. The smaller brewers, without the need to do high-volume batches, create more flavorful beer styles or versions that appeal to ever-discerning and ever-experimenting consumers.

• Sense of place. Beers from independent breweries become identified with cities and regions, and they tie in with strong consumer demand for locally produced products.

Consumers are expecting innovation and they want to know where their food and beverages come from. That’s why many pizza operators and others in the dining industry are linking their success and profitability to classic and innovative beers from independent brewers. It is not about the number of beers, but the mix—the mix of beer styles and the mix of where the beers originate.

The battle lines are drawn. Today, independent brewers account for around 7 percent of all beer sold in the U.S. Whether that percentage goes up or down in the next decade will be determined in great part by the actions of consumers and those who sell the beverages.

Consumers expect pizza-focused restaurants to create beer programs that reflect their business plans. Often, this means going beyond quality to issues of authenticity and origin. Operators who create interesting and diverse beer programs may stand the best chance by selling both craft pizza and craft beers.

Dan Kopman is a co-founder and active principal of Schlafly Beer, a craft brewing company based in St. Louis, Mo. He will be one of the panelists at Pizza Expo in March on the subject of “Building a Profitable Craft Beer Program.” Schlafly Beer will also be offering samples in the Craft Beer Pavilion at Expo.